The meaning of exclusively under section 37(1) of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of exclusively.
Meaning of exclusively defined by court
The phrase ‘exclusively’ used in section 37(1) of the Income Tax Act came up before hon’ble Rajasthan high court in ACIT Vs. Rajasthan spinning & Weaving Mills Ltd.  137 Taxman 367 (Raj.) and it explained.
Meaning: It is well-settled that the expression ‘wholly and exclusively’ does not denote ‘necessarily’. The word ‘wholly’ refers to quantum of expenditure. The word ‘exclusively’ refers to motive, objective or purpose with which the particular expense has been incurred.
Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his business. Such expenses can be incurred voluntarily and without necessity. If it is incurred for promoting the business and to earn the profits, the assessee can claim the deduction.
Section 37 of Income Tax Act
37.(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.
Explanation 1.—For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.
Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.
(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.
In this article, you can get guidance from high courts on the meaning of exclusively under section 37(1) of the Income Tax Act.
Updated up to Finance Act 2021